March 1 (Reuters) - Oil and gas producer Canadian Natural Resources Ltd said on Thursday it will slow its output of heavy crude due to a steep price discount tied to tight transportation capacity from the landlocked Alberta province.

CNRL, one of Canada’s largest heavy oil and gas producers, is delaying the completion and production ramp-up of some wells that produce heavy oil, President Tim McKay said on a conference call with analysts.

“Although oil is moving, the (price) differentials are behaving as if the oil can’t move,” McKay said.

The company is also considering reducing its heavy oil drilling program in the second half, and switching to more light oil drilling, McKay said.

In an interview, McKay said he expects the cumulative effect of slowing heavy output from new wells and advancing the timing of planned outages at some production sites will be“quite minor” for overall production.

“We look at the differentials all the time and our ability to start and stop our drilling program, based on what’s going on with the commodities,” he said.

The company’s Toronto-listed shares were up 65 Canadian cents, or 1.6 percent, to C$40.40.

Alberta oil producers have struggled to move crude to U.S. refineries due to strained pipeline and rail capacity, leading to a bigger-than-usual discount on Canadian heavy crude, called Western Canada Select (WCS), compared to U.S. benchmark West Texas Intermediate (WTI) light oil.

Heavy crude must be diluted to move through pipelines, adding cost.

CNRL’s heavy oil output was 1 percent higher during the fourth quarter than the preceding quarter. The company expanded its Horizon oil sands site last year.

WCS heavy crude was trading on Thursday at $24.70 per barrel below WTI, according to Shorcan Energy Brokers data.

The Alberta government on Wednesday estimated that the higher-than-usual differential was costing heavy oil producers C$30 million to C$40 million in revenue per day.

Overall daily production during the quarter rose 19 percent to 1 million barrels of oil equivalent per day (boe/d).

The company’s net income fell to C$396 million ($308.17 million), or 32 Canadian cents per share, in the fourth quarter, from C$566 million, or 51 Canadian cents per share, a year earlier.

Excluding items, the company earned 46 Canadian cents per share, beating analysts’ average estimate of 36 Canadian cents, according to Thomson Reuters I/B/E/S. ($1 = C$1.29) (Reporting by Rod Nickel in Winnipeg, Manitoba, Karan Nagarkatti and Anirban Paul in Bengaluru; editing by Shounak Dasgupta, Will Dunham and David Gregorio)

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